Global Supply Chains – How Shocks in One Country Affect the World

Santiago Bel
October 26, 2025

When most people think of globalization, many think of trade, ships full of goods, international brands and products made “somewhere else.” But the deeper connection in the world economy today is not trade but supply chains. The raw materials that cross borders multiple times before reaching the consumer are converted to finished products through complex systems. A single iPhone may depend on Democratic Republic of Congo’s cobalt, Taiwan’s semiconductors, California’s design teams, and China’s final product assembly. When companies can make things quickly and cheaply, it makes the world economy fragile. When something goes wrong in one part, it creates trouble for the whole chain.

COVID-19 pandemic showed how fragile supply chains can be. At the start of 2020, the factories in China were shut down so as to stop the transmission of the virus. This brought the manufacturing of everything from computers to spare auto parts to a standstill. Those closures caused shortages around the world. Car makers in the U.S. suspended production due to supply shortage of semiconductors. Medical supply chains also faltered. The shortages of masks and gloves showed how reliant rich countries had become on Asian manufacturing. Shipping costs went through the roof, with container prices increasing by as much as 500%. There was a clear message: saving energy costs money if you want resilient infrastructure.

A supply chain is essentially a network. Each link is a supplier, manufacturer or distributor that depends on another link. The system is efficient unless everything is running smoothly. This is because companies maintain a very low inventory to save costs. Companies use a strategy called “just-in-time manufacturing”. Thus, the disruption of the system creates huge delays. One good example is the blockage of the Suez Canal by the cargo ship Ever Given in 2021. For six days, one ship lodged sideways in a narrow waterway froze 12% of world trade. The ripple effect held up goods for months, raised prices, and showed how one fender bender could affect billions in commerce.

Geopolitical tensions have added another layer of risk. The rivalry between the U.S. and China is continuing to affect global supply chains. While Donald Trump was president, tons of tariffs were placed on hundreds of billions of dollars of Chinese tariffs. Many companies relied on Chinese manufacturers now looking for suppliers in Vietnam, India, Mexico and other countries. Biden’s administration is pursuing “supply chain resilience,” especially in semiconductors and renewable energy, and other critical sectors. The CHIPS and Science Act went to Congress in 2022 to bring semiconductor manufacturing back to the U.S. The semiconductor shortage was so severe, it slowed everything from smart phones to cars.

The tiny chips that power our electronics, semiconductors, show just how fragile supply chains can be. Taiwan’s TSMC makes more than 60% of the world’s advanced semiconductors. The global economy is at risk by relying on just a small island. A natural disaster, military conflict or even political instability there could lead to worldwide shortages and economic disturbance.

Other industries face similar risks. In 2022, the Ukraine war disrupted food and energy markets across the world. Almost one-third of the world’s wheat export comes from Russia and Ukraine. The food prices skyrocketed everywhere in the world when fighting disrupted those shipments. While this was happening, sanctions on Russia caused energy prices in Europe to soar. Germany and other countries saw transsourcing energy gas-related solutions. Due to rising inflation all over the world, many developing countries experienced a balance-of-payments crisis as it became more expensive to import fuel and food.

Due to these incidents, there is a second thought among decision-makers and business elites. For a long time, globalisation was all about efficiency - the cheapest supply and minimising costs. Now they discuss safety, security, and resilience. “Friendshoring” or “nearshoring” is a strategy adopted by countries meaning trade with one’s political allies or shifting production closer to home. For instance, the U.S. is attempting to encourage companies to switch their factories from China to Mexico or to locations on American soil where supply lines are shorter and more reliable. Like China, Japan is also subsidizing companies that move production from China to Southeast Asia.

However, rebuilding supply chains isn’t simple. Building factories, training workers and creating local supplier networks takes years. Relocating away from China could lead to increased costs for consumers as labor and logistics there work very efficiently. Companies are faced with a dilemma: more security or more money? As per the I.M.F. estimates, the economists predict that the full-scale “deglobalization” could lower global growth by 5%. Even so, governments believe that some redundancy like having alternate suppliers for critical goods may be worth the cost to prevent disasters.

Climate change is adding yet another challenge. Severe weather happens more often nowadays and gets in the way of farming. In 2021 floods in Germany and China damaged factories and ship routes. In South America people didn't have enough food to eat. The environment is becoming more of a factor in supply chain planning because of this. Advanced technology predictions and rerouting may help with logistical issues but the challenge of complex parts is ineffective.

Technology might also reshape supply chains in other ways. Due to the advancements in automation and robotics, it appears that certain factories can feasibly relocate to the United States possibly without increases in costs. Small-scale, local things can be plugged in all that have to be shipped from around the entire world. The digital world can trace, transparently, the origin and destination of products, validating the honest sourcing of raw materials. New ways may create sustainable globalization along with making more use of trade, needing DCs and cooperation.

The main argument in global supply chains is the perfect balance. How much efficiency should we sacrifice for resilience? How much independence can a country possess in today's contemporary society? Countries and suppliers are getting too expensive and too powerful. It's just business after all. 

The U.S. would have to keep balance between both sides. The government is supporting domestic industries by spending money for a new generation of chipmaking and clean energy while they still need and rely on foreign for raw materials and intermediate goods to be able to complete the process overseas and to also make it cheaper. Diversifying their suppliers is a must for businesses, although that adjustment won't come without a time consuming process. The communication strike is causing people, or consumers to feel the effects from higher prices to longer time expected for a delivery.

The economy is vulnerable even though supply chains seem like an efficient system. Globalization won't be happening as much in the next few years, countries will start to realize that some countries aren't reliable sources for materials depending on what they want and what they are going to need for trade. In the world of today’s economy, there can be unexpected events that can bring advantages and disadvantages much faster.